Microsoft's Windows Strategy: A New Hope

Microsoft's Mobile World Congress announcements suggest a successful, and overdue, new direction for its Windows 8.1 strategy. Now Microsoft needs to build momentum.

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Does Microsoft finally have a viable strategy for Windows 8.1?

At Mobile World Congress, the company confirmed Windows and Windows Phone updates that will open the platforms to broader ranges of hardware. The Windows 8.1 update should make the touch-oriented OS easier to use on non-touch devices. Both updates should allow OEMs to manufacture much cheaper products, delivering Windows 8.1 devices into the same price brackets that have made Chromebooks and Android devices so popular.

The lower price ranges are important because they represent the greatest growth opportunity. According to the research firm IDC, smartphone shipments will dip to single-digit percentage growths by 2018, with most of the expansion coming from low-cost devices sold in emerging markets. IDC has said the tablet market is maturing even faster.

IDC projects Windows platforms will account for 7% of the smartphone market in 2018 and 10.2% of the tablet market in 2017. In both cases that's a distant third behind Android and iOS. Predictions like these demonstrate why some Microsoft critics resist the company's device ambitions.

Microsoft defenders like to spin such forecasts by pointing out that Windows platforms are poised to achieve better percentage growth than iOS or Android-based ones.

This is the wrong way to look at it. High-percentage growth is easier to achieve when the base volume is low. If a company sells 10 units one year and 50 units the next year, it achieves remarkable growth in percentage terms -- but unless each unit is incredibly profitable, the company still probably isn't making much money. This is the dilemma Microsoft faces: Because it arrived late to the mobile market and stumbled once it got there, it faces few growth avenues, most involving little direct profit. It's worth noting that even though IDC projects Windows growth, it expects Apple to maintain its lead in the most lucrative segments.

Will Microsoft score with cheaper hardware and a UI that's better suited to mice and keyboards?

Microsoft's forthcoming updates could improve the situation in several ways. First, they enable Windows platforms to cut into Android's slice of the emerging-market pie. Microsoft hasn't confirmed reports that it is cutting Windows Phone or Windows licensing costs, but at Mobile World Congress, its dedication to low-cost devices was clear. Windows devices have made modest progress as prices have slid lower -- and with a likely fleet of sub-$200 options on the way, that progress could outpace IDC's expectations.

By creating a larger footprint in emerging markets, Microsoft impedes Android from becoming the reference point for a new generation of users -- a battle Nokia CEO Stephen Elop referenced when he explained how the Android-based Nokia X platform could still benefit Microsoft. With victories on this front, Microsoft could not only sell more of its software and services, but also create a market for potential device upgrades. This could give the Surface line some breathing room.

Essentially, Microsoft could become to its own operating systems what Samsung is to Android. Even though Google's OS commands more users than any other platform, Samsung is the only Android OEM that really makes much on devices. It's a problem with emerging-market domination. High volumes of low-margin devices don't necessarily translate to a lot of profit. When Microsoft launched the Surface RT, it assumed it would capture premium market share simply by showing up. As last quarter's record iPad sales indicate, this hasn't been the case. But the updates give both Windows and Windows Phone OEMs more incentive to do the heavy lifting in budget markets. If the tactic attracts more Windows 8.1 users, demand for the Surface 2 and other, more expensive, devices can only increase.

At the same time, this Windows update demonstrates Microsoft's awareness that traditional designs aren't going away. Windows 8's reliance on touch alienated many longtime Microsoft customers, and Windows 8.1 appears to have undone only some of the damage to the product's reputation. The update coming this spring appears to still lack a Start menu, which will disappoint desktop users.

Still, a version of Windows 8 that works better on non-touch devices can only help. Combined with increased attention to emerging markets and a renewed push from OEM partners, Windows 8's prospects are better than they have been in some time.

Microsoft's next challenge will be to sustain this momentum in April, when it will hold Build, its conference for developers. After taking so much heat for Windows 8, it could use a home run. If online chatter is any indication, the company might have some more surprises in store for Build, such as Cortana, its long-rumored Siri competitor, or perhaps even an early peek at Windows 9.

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Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

I don't think it's quite like Android overtaking iOS. Apple's hardware margins are the envy of all device makers, and it milks more ecosystem profit than anyone. A company with that sort of control over lucrative customer segments can afford to let Android eat up low-profit market share. Microsoft, on the other hand, has no significant mobile presence, and the tablet market is maturing even faster than the smartphone market did. I think it's unfair to call Windows 8.1 a useless product or an unmitigated failure-- but I also don't think Microsoft can afford to let it grow organically at its current pace. In the enterprise, both the Windows OS and Microsoft services are fairly insulated, but in consumer/BYOD markets, Microsoft will have to negotiate how much revenue comes from Windows itself, and how much comes from cross-platform services that are decoupled from the OS.

I agree, though, that Microsoft gets way too much pressure to dump Xbox and Bing. Both are already valuable in certain ways, and each offers too much potential to discard.

That doesn't surprise me, mak63-- I think that's a sensible way of looking at Windows 8.1 actually offers, as opposed to what it doesn't. But if customers are generally content after having some context realignment, why is the OS still struggling so much? Do you find that Windows 8.1's benefits, such as they are, just aren't persuasive enough to justify more than targeted deployments? Just curious about your experience.

Why future desktops can not be a combination of touch, voice input and mouse/keyboard?

People can use any input as they say fit. I know mouse/keyboard won't go anywhere anytime soon, but neither does touch enabled systems.Actually, I imagine a future where more and more hybrids and tablets will replace current desktops. Don't you agree?So in order to make touch usable on the desktop everyone has to spend hundreds if not thousands of dollars

I disagree with that. Touch screen monitors have been around for a while. They shouldn't be so expensive.

In fact, you can find a 23" touch screen monitor for 150 bucks. That's really not bad.

Also, people or business won't spend a lot of money in modifying furniture to accommodate a computer. They will be better off buying a hybrid or a tablet (with a wireless keyboard and mouse if they think it will be necessary)

I might agree with you. But what I tell my clients & friends is that they will better off thinking that Windows 8/8.1 is a dual system. One for touch, but it still can be used with mouse and keyboard and the regular desktop. They seem to accept the idea. I don't hear much complains about it after that.

My impressions of Windows 8 have been that they should have developed more than one version. They should have had a touch and a non-touch system. The way that they clumped everything together was problematic.

Imagine, for example if you did not buy a touch device that had Windows 8?

I think there is no future for touch on the traditional desktop setup. That said, I do like touch on mobile devices. Touch works there and is a necessity to keep device sizes small. Mobile devices being mainly used for consuming content do not need keyboards. That changes once even light editing is a more common need, the soft keyboards on the screens are not only horrible to type on, they also use up too much screen space which on mobile devices is the biggest premium.

The traditional desktop has a monitor that is mounted upright on top of the desk (thus desktop). Using touch on this traditional setup means reachoing out to a monitor. While that may be fun and functional for the casual action, it is very fatiguing. Besides that, no desktop touch implementation is complete as there is still a need to use mouse and keyboard. If touch on the desktop is to make sense, then it needs to replace mouse and keyboard entirely. Even then, there are drawbacks. The mouse is a much better pointing device than a finger. The small mouse pointer also does not obstruct the screen as the big hand does. With the higher resolution and better accuracy there is also no need for big hunky tiles and buttons that provide plenyt of landing space for fingers.

Let's assume there will be an OS that overcomes all these things, we still have a lot of work to do here. In order to make touch on desktops ergonomical we need to take out the saws, cut holes into our office furniture, and mount the touch monitors into the desktop surfaces at the correct angle. Since touch UIs need to have much larger controls we desperately need at least two monitors just to be able to display what we currently can display. Ideally, a third, specially crafted multi-purpose monitor needs to be mounted that is mainly used as text entry device. If it is to mimic a keyboard (after all, we developed tremendous skills in using keyboards) the special monitor needs to provide tactile feedback. That technology already exists.

OK, so we need to buy more expensive monitors, have to replace all applications so that they all have a touch enabled UI, we have to cut our office furniture into pieces or buy new, and we need an OS that properly supports all that. So in order to make touch usable on the desktop everyone has to spend hundreds if not thousands of dollars to just get back to the current productivity levels that can be accomplished with a traditional keyboard and mouse and a cheap upright monitor...and all that to accomplish the exact same stuff as we do now!!

Re: "IDC projects Windows platforms will account for 7% of the smartphone market in 2018 and 10.2% of the tablet market in 2017. In both cases that's a distant third behind Android and iOS. Predictions like these demonstrate why some Microsoft critics resist the company's device ambitions."

Rome wasn't built in a day.

This is the sort of thing people that worried critics about Apple when Android overtook iOS.

I'm also wary (and weary) of Microsoft critics saying that MSFT needs to get out of everything except it's "core business" -- including XBox, Bing, etc..

mak63, I agree with you for some extent. Having touch screen on your laptop will make the life miserable for the user depending on the work they do. But if you have the best practice it will be a nice to have feature.